The State of the Automotive Industry: A Study

When we think about the technologies that have changed the face of the world and built the modern era, it is impossible to forget or ignore the role of the automotive industry. The automotive industry and the broader sector that it supports defined more than two generations of economic prosperity and mobility in the United States. The automobile in many ways marked the maturity of the industrial age and has since made an indelible mark on our culture and everyday life.

The automotive sector is one with constant innovation at its heart, not only in areas of mechanics and materials, but across a swathe of areas from design to manufacturing and business models. The automotive sector has continued to evolve and diversify, and today contributes more than $953 billion per year to the American economy and supports some 7.25 million jobs in the U.S. Globally, the automotive industry spends about $100 billion on research and development, $18 billion of which occurs in the U.S.

With such a substantial investment in R&D, the automotive industry is a major player in the patent landscape. Juristat’s data, tools, and expertise on the domestic patent system allows us to see where the automotive industry has focused its innovative energies, how that focus has shifted over the past 40 years, and where that focus may be in the future.

The automobile industry is nothing if not innovative. Our search of the top 25 global auto manufacturers and top 100 global OEM parts suppliers, together what we consider to be the automotive industry, have had more than 382,000 patent applications granted in nearly 550 different classes since 1976. Even with the breadth of innovation that the automobile industry has shown, perhaps no element is more closely tied to it as the internal combustion engine.

The internal combustion engine, which traces its modern form from at least the 19th century, has undergone innumerable improvements and evolutions since that time. Lately, rumors have swirled about the demise of the traditional internal combustion engine as electric motors and vehicles have become increasingly available. Using Juristat’s database of USPTO patent data, we analyzed whether there is any truth to this claim, looked at where the automotive industry is making the most innovations, and determined which technology areas have grown the most quickly since 2011.

Our analysis shows that from 1976 through 2016, the automotive industry was granted more patents related to the internal combustion engine (USPC Class 123) than in any other USPTO class, accounting for 5% of the auto industry’s disposed patent filings. Over that time, the relative share of internal combustion engine patent grants has fallen from a high of 10.8% in 1979 to 3.9% of granted applications 2016.

From 1977 until 2007 the automotive industry had more applications granted in Class 123 each year than in any other class. Since 2009, however, Class 701 applications (Data processing: vehicles, navigation, and relative location) have taken the top spot. Indeed, since 2010 Class 701 applications have been allowed twice as frequently as Class 123 applications.

Comparing the list of top 20 classes from 1976-2016, there is a clear movement away from mechanical systems and more toward electronic-related classes. While this should not come as a surprise given the general trend to more highly integrated devices, products, and services of all kinds, the rate of change is. The number of Class 701 applications has grown 5 times faster than Class 123 applications, and other electronic-related classes are growing quickly.

The fastest growing segments of the automotive industry’s patent applications are clearly in the traditional “high tech” area. Among the 30 fastest growing classes in the automotive industry’s portfolio, 12 are directly related to data processing, computers, communications, and electronics. Patent applications in classes related to batteries, capacitors, and electric motors are also growing quickly, though applications in those classes are still growing more slowly than Class 123 applications.

Class 123 applications continue to be a significant player in the automotive industry, and seem to be in no danger of being overtaken by applications for electric motors. The explosion of data-related patents, especially Class 701’s vehicle navigation patent applications, may be a sign that, while the internal combustion engine is not dying, the driver’s seat may be.

Beyond looking at the patent landscape inhabited by the automotive industry, we also wanted to know how the automotive industry fared in front of the USPTO’s patent examiners. Our comprehensive database and analytics allow us to compare the relative performance of companies within the automotive industry and to get an idea of how effective the automotive industry is in its patent prosecution efforts. Using our Juristat Key Metrics for the automotive industry from 2000-2016, we looked at how the automobile industry fared on the (utility) patent highway and whether parts suppliers or auto manufacturers have had the smoother ride.

Allowance rates measure how effective an entity is performing before the USPTO, and the automotive industry is considerably more effective than average. Overall, the auto industry has an average allowance rate of just over 80%, higher than the USPTO overall average of 74%. Comparing auto manufacturers and parts suppliers, we see some interesting differences. Notably, the average overall allowance rate for automobile manufacturers (84.6%) is more than five percentage points higher than for parts manufacturers (79.1%). Indeed, since 2000, automobile manufacturers have consistently outperformed auto parts manufacturers on allowance rates.

In a market as highly competitive as the automobile industry time is money, particularly when it comes to patent applications. We looked at the average time to disposition in months and found that the auto industry was slightly faster than the USPTO average of 32.7 months. As a whole the automobile industry disposed its applications about 2 months faster than the USPTO average, as did auto parts suppliers. Automobile manufacturers are even faster to disposition than either the auto industry or parts manufacturers, taking less than 30 months to disposition on average.

The automobile industry, in addition to being slightly faster to disposition than the USPTO as a whole, is also more efficient in its patent prosecutions. Looking at the average number of office actions to disposition (OAs), the automotive industry outperforms the USPTO average, taking 1.53 office actions to disposition compared to the USPTO’s 1.94. Parts manufacturers are particularly effective, averaging 1.47 OAs compared to automobile manufacturers’ 1.68 OAs. Here parts manufacturers consistently outperform automobile manufacturers.

Tracking the average number of claim changes from the time an application is published to the time it is granted also provides a measure of effectiveness in front of the USPTO. On average the automobile industry does a better job of retaining claims through prosecution than the USPTO. The automotive industry on average loses 0.21 independent and 1.61 dependent claims throughout prosecution, considerably lower than the USPTO averages of .39 independent and 3.03 dependent claims lost during prosecution. Within the automobile industry, automobile manufacturers are slightly better at retaining dependent claims through prosecution than parts manufacturers though seem to be significantly better at retaining independent claims, losing only .04 per disposed application.

Based on our key metrics, automobile manufacturers edge out parts suppliers in their efficiency and effectiveness as patent prosecutors, though not by much. The automobile industry’s overall performance in comparison to the USPTO average is just one sign of a mature industry that drives innovation.

To take a look under the hood and understand how both assignees and patent prosecution teams fare at the USPTO, or to discover where they can provide additional value, schedule a personalized demo orcontact us.

Juristat’s suite of advanced patent analytic and strategic decision-making tools help our users go beyond surface level analytics and empower them to engage the deep and nuanced analysis necessary to understand an industry, and improve thiers.